Most alt credit fund peer groups post Q2 gains despite headwinds
Alternative credit investment funds delivered modest returns in the second quarter of 2025 despite numerous geopolitical and economic headwinds, according to advisory firm Gapstow.
The Gapstow Alternative Credit Interval Fund Composite Index, which comprises the equally weighted average of four peer groups – broadly syndicated credit, structured credit, direct lending and multi-strategy – gained 2.1 per cent over the quarter.
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Structured and multi-strategy credit segments led the gains, with 2.4 per cent and 2.3 per cent respectively, as both quarters beat their first quarter equivalents of 1.7 per cent and one per cent.
Direct lending fell marginally between three-month periods, from 1.8 per cent to 1.6 per cent.
Year to date, the broad index posted 3.4 per cent.
Elsewhere, the Gapstow Listed (or Liquid) Alternative Credit Index lost 0.3 per cent in the second quarter, down from 1.8 per cent in the first.
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This index includes business development companies (BDCs), commercial real estate, mortgage, agency mortgage and non-agency mortgage real estate investment trusts (REITs).
Non-agency mortgage REITs held up the strongest over the period, delivering a 2.6 per cent gain, although this was down on the first three months of the year, during which this peer group returned 4.3 per cent.
Commercial real estate mortgage REITs suffered the biggest decline between periods, returning 0.1 per cent in the first quarter and losing 6.9 per cent in the second. This was also reflected in its 6.9 per cent loss during the year to date.
This peer group and agency mortgage REITs were the only two negative performers across the quarter.
Conversely, non-agency mortgage REITs were also the strongest performer year to date, gaining 6.9 per cent, lifting the index on aggregate.
“The second quarter of 2025 produced a seemingly endless parade of significant and often negative economic shocks,” said Gapstow’s Alternative Credit Fund Peer Groups Q2 2025 Performance Report.
It cited the tariffs imposed by Donald Trump, his subsequent “assault” on the the Federal Reserve’s independence, Moody’s downgrade of US credit risk and exacerbated tensions in the Middle East, including the US bombing of Iran as among the pressures hitting credit markets.
